TRENTON — Senate President Stephen Sweeney is proposing to raise taxes by one-third on nearly 2,400 corporations with profits of over $1 million, saying they got a windfall from federal tax reform. He wants the more than $650 million that could result to be used for school funding.

Sweeney, D-Gloucester, said he’s not worried that having the nation’s highest corporate tax rate, tied with Iowa at 12 percent, would worsen New Jersey’s business climate.

He said New Jersey corporations would still keep 83 percent of a $2.9 billion federal tax cut he referred to as a gift. The higher state tax bill would remain deductible from federal taxes for the businesses, lowering the cost to them from $657 million to $520 million.

“This is a way to fund schools, not going into their pocket because this is money they never had,” Sweeney said. “They didn’t work for it. They didn’t earn it. They didn’t sell one more product for it. They did nothing for it.”

Senate Minority Leader Tom Kean Jr., R-Union, said it’s a strange concept to talk about recapturing what some people think is actually the government’s money.

“To now turn around and simply increase taxes because you can, I think, is short-sighted,” Kean said.

“It’s yet another tax increase. It sends the wrong signals to New Jersey residents to New Jersey families and to the country when everybody else realizes it’s simply unaffordable to stay in New Jersey as it is,” he said.

The proposal comes a week before Gov. Phil Murphy introduces his first budget and marks the latest twist for Murphy’s plan to raise taxes on income over $1 million, which Sweeney continues to call a last resort. He said the corporate tax proposal isn’t an alternative to the millionaires’ tax.

“This isn’t me against him,” Sweeney said. “This is myself as a senator, as the Senate president, looking at ways to find funding for our schools. I think this is one that does the least amount of damage to the state of New Jersey.”

Murphy said Sweeney’s plan has “got some appeal” and that he read it “with great interest,” although he expressed concern that beginning the 3 percent surcharge at $1 million in net income could ding some small businesses. And he said it’s not a substitute for a millionaires’ tax.

“I don’t see it as an alternative. Perhaps as an additional weapon at our disposal,” Murphy said. “But I love the creative thinking that’s coming from any corner. But we’re going to give that some more thought, absolutely.”

In all, Sweeney is suggesting $758 million in changes to school funding — $431 for special education aid that would go to all school districts, $277 million in aid to districts not getting their full funding as calculated by the school-aid formula and $50 million for preschool grants.

The idea calls for reallocating $127 million from districts that get more aid than their current enrollment would provide to districts that are considered underfunded.

Around 42,000 corporations that earn less than $1 million wouldn’t pay more in taxes, and the change wouldn’t affect S corporations or partnerships. Senate Democrats said the change would affect about 2,375 companies, who will pay about $1.97 billion of the $2.375 billion in projected corporate business taxes projected for the current state budget.

Sweeney said the proposal is fair because the companies got a windfall from federal tax reform, which also limited tax deductions popular in New Jersey.

“This is the ability to try to grab – not to grab but – this is the ability to try come up with a way to treat the taxpayers fairer in this deal,” Sweeney said. “The federal tax cut was an assault and an attack on the people of New Jersey. It hurt New Jerseyans, period, across the board – up, down, all over the place.”

Michele Siekerka, president and chief executive officer of the New Jersey Business and Industry Association, said she’s “very much concerned” that having the region’s highest corporate tax rate would hurt New Jersey’s competitiveness.

Siekerka said companies are already announcing how they’ll use the money resulting from corporate tax cuts.

“Companies are increasing wages. They’re giving bonuses. They’re reinvesting in their communities by setting up special interest funds for vulnerable citizens in the state of New Jersey,” Siekerka said. “You can rest assured that this increased CBT charge to them now will absolutely cause them to pause on those reinvestments while they figure out what the ultimate impact to them will be.”

An analysis by a columnist for Bloomberg this week shows that about 60 percent of tax savings are going to shareholders, through stock buybacks and increased dividends, with about 15 percent going to employees

Siekerka also said the federal tax changes also broadened the tax base and that while companies will pay a lower federal tax rate, some will begin paying taxes on aspects of their business that were not taxed in the past.